Global Economics

Philippines IT Industry Looks Strong for 2007

Nearly 70% of the island nation's companies foresee an increase in IT spending. IDC projects hardware will account for 67% of the total expenditure

Philippine companies are upbeat on their IT spending this year, a new study has found.

According to analyst house IDC, nearly 70 percent of companies in the Philippines are positive on the country's economic climate and foresee an increase in IT spending.

"Considering that the country is still on the edge of completing and improving infrastructure for IT adoption, the report shares that hardware spending will continue to top most companies' list, followed by software and services," IDC added.

The analyst company predicted that IT and telecoms spending in the Philippines will grow by over 10 percent in 2007. Hardware is projected to account for 67 percent of total IT spending, spearheaded by the expected growth in personal systems.

The IT services and software segment will expand by 14.2 percent and 10.5 percent, respectively, while wireless services will contribute almost 68 percent of total telecoms spending.

"This translates into more investments from the various sectors, as each engage to either grow its business or strengthen its foothold in the market it is playing." IDC added. "These buying trends will center on maintenance, replacements, upgrades, and first-time investments."

Catherine Foronda, an analyst at IDC Philippines, noted that IT vendors hoping to ride on the positive IT industry outlook should allocate resources to improve after-sales support and services.

"In addition, vendors should also offer flexible offerings, take the verticalization approach, and expand market reach by pursuing non-traditional and alternative routes," she said.

In a separate report released in January, IDC predicted that the Philippine IT market will be marked by efforts from IT players to "innovate, redefine, and expand" in 2007.

Specifically, the bundling of security and storage products will drive growth in the server market, IDC said, adding that such products can ease setup complexity and lower costs.

IT players are also expected to move into the consumer space through enterprises in 2007. Corporate product packages that are intended for employees' personal usage offer a good alternative retail channel to provide attractive pricing for consumers, IDC said.

Amidst the optimism, however, the export of Philippine IT professionals to Asean countries will accelerate this year. IDC called for a policy review to reverse this trend, since worker migration could gradually develop into a shortage of qualified IT professionals.

In the BPO (business process outsourcing) space, IDC predicted that 2007 will prove to be an "acid test". The Philippine BPO industry will reposition itself as "quality-of-service destination" rather than a pure "cost-reducing destination", to veer away from the emergence of China, Vietnam and Eastern European countries.